FINDINGS AND RECOMMENDATIONS GRANTING IN PART
DEFENDANT'S MOTION FOR ATTORNEYS' FEES AND COSTS
(Doc. 81)

Jennifer L. Thurston, UNITED STATES MAGISTRATE JUDGE

Defendant
Goose Pond Ag, Inc. seeks an award of attorneys' fees and
costs related to this action, “pursuant to the
attorneys' fees clause in the Real Estate Purchase
Agreement … upon which Plaintiffs based their
Complaint.” (Doc. 81-1 at 2) Plaintiffs oppose the
motion, asserting Defendants are not entitled to fees and
costs because they were not a prevailing party on the
contract. (Doc. 94)

For the
following reasons, the Court finds Defendant is a prevailing
party, and recommends the motion for fees be GRANTED in part.

I.
Background

This
action concerns a dispute arising from the negotiations for a
real estate purchase of farmland between Plaintiffs Randeep
Dhillon, also known as Dhillon Singh, and Kern Lerdo Nuts
(“Plaintiffs”) and Goose Pond Ag, Inc. (See
generally Doc. 29) Dhillon asserted that in May 2015, he
“became aware of a marketing brochure that stated that
Goose Pond was selling approximately 2, 470 acres of
farmland, primarily consisting of an almond farm …,
which included the existing irrigation systems and twenty
three water wells in working condition, by requesting bids to
potential buyers.” (Id. at 4, ¶ 6)
According to Plaintiffs, Dhillon contacted Goose Pond's
agent and, in his capacity as the Director and President of
Lerdo Nuts, signed a confidentiality agreement regarding the
farmland. (Id. at 5, ¶¶ 7-8) Plaintiffs
alleged that Dhillon reviewed information regarding the
farmland, and received an opportunity to tour the property.
(Id., ¶¶ 9-10)

Plaintiffs
alleged they submitted a bid on June 6, 2015, including
“an offer to purchase” the farmland, the 2015
almond crop, irrigation symptoms, 23 water wells, “and
all water rights to all related properties that had separate
APN numbers.” (Doc. 29 at 6, ¶ 11) Plaintiffs
asserted that Goose Pond informed Dhillon he had “been
accepted as one of the top bidders” on June 30, and a
“best and final offer” with proof of funds was
“due Thursday, July 9th by 2pm EST.”
(Id. at 7, ¶ 12, emphasis omitted) However, the
bid deadline was later extended to July 16. (Id.,
¶ 13) Plaintiffs alleged Dhillon submitted “a new
bid in the amount of $62, 100, 000 … with proof of
funds” on July 16, 2015. (Id., ¶ 16)

According
to Plaintiffs, their agent received an e-mail on July 20,
2015, which stated in relevant part: “After review of
best and final bids on Kern Lerdo, we would like to proceed
with the offer submitted by your client, Dr. Randeep Dhillon,
for $62, 100, 000, which is inclusive of the land, equipment,
and 2015 almond crop.” (Doc. 29 at 8, ¶ 18) In
addition, Plaintiffs alleged the e-mail addressed cultural
costs reimbursement, financial statements, and stated a real
estate purchase contract would be provided for their review
and comment by July 21. (Id.) Plaintiffs asserted
that once the Purchase and Sales Agreement was received,
Dhillon signed and returned the document on August 4, which
was incorporated into the complaint by
reference.[1]
(Id. at 4, ¶ 5; see also Id. at 10,
¶ 27)

Plaintiffs
alleged, “Dhillon took steps to liquidate his assets by
selling 93 acres of real estate property that he owned, and
selling five gas stations that he owned” after
submitting the signed agreement. (Doc. 29 at 10, ¶ 28)
However, Plaintiffs asserted that on August 17, 2015, Dhillon
was informed “Goose Pond was cancelling the Agreement
and that all communications were being terminated.”
(Id. at 13, ¶ 38)

Based
upon the foregoing allegations, Plaintiffs stated the
following causes of action against Goose Pond: (1) breach of
written agreements, (2) intentional misrepresentation, (3)
negligent misrepresentation, (4) breach of the implied
covenant of good faith and fair dealing, (5) violation of
California Business and Professions Code § 17200, (6)
specific performance, (7) promissory estoppel, and (8) common
count for goods and services. (See Doc. 29 at 14-27)
Plaintiffs included a prayer “[f]or reasonable
attorney's fees and costs” related to the breach of
contracts claim. (Id. at 27)

Defendant
filed an answer to the first amended complaint on April 19,
2016, asserting that Goose Pond “terminated…
negotiations before any [Real Estate Purchase Contract] was
finalized or executed.” (Doc. 30 at 2, ¶ 5)
Defendant maintained that the parties “had not even
reached an agreement of the form of any such agreement”
regarding the sale of the farmland, and that “the only
binding agreement between the parties was the Confidentiality
Agreement.” (Id. at 8, ¶ 39) Further,
Goose Pond asserted the company never “received a
signed copy” of the Purchase and Sale Agreement.
(Id. at 6, ¶ 27)

The
Court issued a Scheduling Order governing the deadlines in
the action on July 25, 2016. (Doc. 35) Thereafter, the
parties engaged in discovery in the action. However,
Plaintiffs failed to produce requested discovery and the
Court ordered Plaintiffs to produce email communications with
corresponding metadata, including the Purchase and Sale
Agreement of August 4, 2015. (Doc. 62) Plaintiffs failed to
comply with the Court's order, and Defendant requested
the imposition of sanctions. In addition, Defendant produced
significant evidence that Plaintiffs falsified documents that
were produced in the course of discovery. (See Doc.
72 at 9-11)

The
Court determined Plaintiffs had “demonstrated their
willingness to ignore deadlines imposed by the Court, disrupt
the course of the litigation, and prepare falsified documents
to respond to discovery requests.” (Doc. 72 at 13)
Further, the Court found that “Plaintiffs'
discovery violations make it impossible for [the] court to be
confident that the parties will ever have access to the true
facts, ” and as a result it was “appropriate to
reject lesser sanctions.” (Doc. 78 at 5, citing
Conn. Gen. Life Ins. Co. v. New Images of Beverly
Hills, 482 F.3d 1091, 1097 (9th Cir. 2007)).
Accordingly, the recommendation for terminating sanctions was
adopted on April 17, 2017, and the action was dismissed with
prejudice. (Id. at 6)

On
April 25, 2017, Defendant filed the motion for attorney fees
and costs now pending before the Court, asserting the award
was appropriate pursuant to California Civil Code Section
1717, Local Rule 293, and Rule 54 of the Federal Rules of
Civil Procedure. (Doc. 81) According to Defendant, the motion
was made “on the grounds that Plaintiff's eight
contract-related claims were premised on the existence of a
[Real Estate Purchase Agreement] that contained an
attorneys' fees provision” and Plaintiffs
“claimed entitlement to their fees and costs under this
provision in their Complaint and would have been entitled to
such fees and costs had they prevailed.” (Id.
at 2) Further, Defendant asserts it is the prevailing party
on the contract claims, because the claims were dismissed
with prejudice. (Id.) On May 9, 2017, Plaintiffs
filed their opposition to the motion, arguing fees and costs
were not appropriate under Section 1717. (Doc. 94) Defendant
filed a reply on May 16, 2017. (Doc. 96)

The
state enacted California Civil Code § 1717 “to
establish mutuality of remedy where [a] contractual provision
makes recovery of attorney's fees available for only one
party [citations], and to prevent oppressive use of one-sided
attorney's fees provisions.” Hsu v.
Abbara, 9 Cal. 4t h 863, 870 (1995) (citation omitted).
Thus, a “prevailing party” for an action on a
contract is entitled to an award of attorney' fees and
costs, if a contract includes a provision for fees and costs.
Cal. Civ.Code § 1717. Specifically, the statute
provides:

In any action on a contract, where the contract specifically
provides that attorney's fees and costs, which are
incurred to enforce that contract, shall be awarded either to
one of the parties or to the prevailing party, then the party
who is determined to be the party prevailing on the contract,
whether he or she is the party specified in the contract or
not, shall be entitled to reasonable attorney's fees in
addition to other costs.

Cal. Civ. Code § 1717(a). The Court must
“determine who is the party prevailing on the contract
for purposes of this section, whether or not the suit
proceeds to final judgment, ” and the “prevailing
party on the contract shall be the party who recovered a
greater relief in the contract.” Id. §
1717(b)(1).

III.
Discussion and Analysis

Defendant's
counsel seeks an award of $511, 279.65 in fees related to
this action. (Doc. 81-1 at 3) Plaintiffs argue Defendant
should not be awarded fees because it “is not the
prevailing party ‘on the contract, ” within the
meaning of Section 1717. (Doc. 94 at 3, emphasis omitted)
Plaintiffs also contend an award of fees and costs would be
unjust in light of the terminating sanctions. (Id.
at 6) Finally, Plaintiffs assert the amount requested is
“excessive and unreasonable.” (Id. at 2)

A.
Whether Defendant is Entitled to Fees and Costs

It is
undisputed that Plaintiffs' claims in this action are
based upon an alleged Purchase and Sale Agreement with
Defendant, and that the agreement included a provision for
attorney fees, stating:

In the event any legal proceeding should be brought to
enforce the terms of this Agreement or for breach of any
provision of this Agreement, the non-prevailing Party shall
reimburse the prevailing party for all reasonable costs and
expenses of the prevailing Party (including its
attorneys' fees, expert witness' fees and
disbursements) at trial or on appeal. For purposes of the
foregoing, (i) “prevailing Party” means (A) in
the case of the Party initiating the enforcement of rights or
remedies, that it recovered substantially all of its claims,
and (B) in the case of the Party defending against such
enforcement, that it successfully defended substantially all
of the claims made against it, and (ii) if no Party is a
“prevailing Party” within the meaning of the
foregoing, then no Party will be entitled to recover its
costs and expenses (including attorney's fees and
disbursements) from any other Party.

(Doc. 82-1 at 56) Plaintiffs argue Defendant is not a
prevailing party on the contract within the meaning of this
provision and, as a result, an award of fees is not
appropriate under Section 1717. (Doc. 94 at 3-5)

1.Prevailing party

Plaintiffs
contend an award is not appropriate because “[t]he
Court did not make a ruling on whether or not an agreement
existed between the parties.” (Doc. 94 at 4) However,
finding that a contract is valid or exists “is not a
prerequisite to an award of attorney fees under section
1717.” Hsu, 9 Cal.4th at 870. Rather, “a
party is entitled to attorney fees under section 1717
‘even when the party prevails on grounds the contract
is inapplicable, invalid, unenforceable, or nonexistent, if
the other party would have been entitled to attorney's
fees had it prevailed.'” Id., quoting
Bovard v. American Horse Enterprises, Inc., 201
Cal.App.3d 832, 842 (1988); see also Anmaco, Inc. v.
Bohlken, 13 Cal.App.4th 891, 902 (1993) (“[a]s
long as an action ‘involves' a contract, and one of
the parties would be entitled to recover attorney fees under
the contract if that party prevails in its lawsuit, the other
party should also be entitled to attorney fees if it
prevails, even if it does so by successfully arguing the
inapplicability, invalidity, unenforceability, or
nonexistence of the same contract”). The California
Court of Appeal explained the “mutuality of
remedy” under Section 1717 as follows:

Where a plaintiff claims breach of a contract containing an
attorney fee provision and the defendant asserts there is no
contract and wins, it will have established that there is no
contract and, hence, no attorney fee provision. Nevertheless,
since the plaintiff would have been entitled to attorney fees
if the plaintiff had succeeded in proving there was a
contract, courts have recognized a right of the defendant to
recover attorney fees even if defendant proves there was no
contract, in order to further the purposes of Civil Code
section 1717.

In
Dhawliwal, this Court determined the defendants were
the “prevailing party” under Section 1717 where
claims for breach of contract were dismissed with prejudice.
Id., 2013 WL 5477374 at *4-5. The Court observed
that “California Code of Civil Procedure section
1032(a)(4) defines prevailing party to include ‘a
defendant as against those plaintiffs who do not recover any
relief against that defendant, ” and because the claims
were dismissed with prejudice, the defendants qualified as
prevailing parties “[w]ithout doubt.”
Id. at *5. Similarly, here, Plaintiffs' claims
have been dismissed with prejudice, and Plaintiffs have not
recovered any relief from Goose Pond Ag. Thus, there is no
question that Defendant is a prevailing party under
California law. See Cal. Code Civ. P. §
1032(a)(4).

2.Claims on the contract

Section
1717 only applies to a party that prevails “on the
contract.” Plaintiffs argue that the eight claims in
the First Amended Complaint are not all “on the
contract” or “inextricably intertwined” to
a contract, and as a result Defendant is not entitled to
fees. (Doc. 94 at 4) According to Plaintiffs, their claims
“are not all dependent on the existence of a contract,
” and “[m]ore than half of Plaintiffs (sic)
claims would have survived even if the Court had found that
there was no valid contract between the parties.”
(Id.) Plaintiffs assert, “At the very least,
Defendant should not recover on noncontract claims.”
(Id., citing Reynolds Metals Co. v.
Alperson, 25 Cal.3d 124, 129-30 (1979)).

In
Reynolds, the court explained that “[w]here a
cause of action based on the contract providing for
attorney's fees is joined with other causes of action
beyond the contract, the prevailing party may recover
attorney's fees under [Civil Code] section 1717 only as
they relate to the contract action. Id., 25 Cal.3d
at 129. On the other hand, “joinder of causes of action
should not dilute [a] right to attorney's fees” and
“fees need not be apportioned when incurred for
representation on an issue common to both a cause of action
in which fees are proper and one in which they are not
allowed.” Id. at 129-30. Consequently, where
contract and non-contract claims are “inextricably
intertwined, ” making it “impracticable, if not
impossible, to separate the multitude of conjoined activities
into compensable or noncompensable time units, ”
apportionment is not necessary. Abdallah v. United
Savings Bank, 43 Cal.App.4th 1101, 1111 (1996).

Significantly,
here, the Court previously observed that in the First Amended
Complaint, “Plaintiffs brought eight contract-related
claims against Defendant.” (Doc. 78 at 1) Specifically,
the claims presented included: intentional misrepresentation,
negligent misrepresentation, breach of the implied covenant
of good faith and fair dealing, violation of California
Business and Professions Code § 17200, specific
performance, promissory estoppel, and common count for goods
and services. (See Doc. 29 at 14-27) Each claim is
inextricably intertwined with the breach of the written
agreements claim because they are rooted upon the same
alleged conduct. For example, Plaintiffs' claims for
intentional and negligent misrepresentation rely upon the
allegations that Defendant informed Dhillon “it had
accepted [his] best and final bid to purchase the Farmland,
” and “it would sell the Farmland to Plaintiffs
under the terms and conditions set forth in the
Agreement.” (Id. at ¶¶ 54, 66)
(emphasis added) Plaintiffs base their claim for a violation
of Cal. Bus. & Prof. Code § 17200 upon “the
aforementioned false, misleading and deceptive statements,
” evidently related to the acceptance of Dhillon's
bid and an agreement to sell. (See Id. at 22, ¶
84)

Further,
“[u]nder California law, a claim for breach of the
implied covenant is necessarily based on the existence of
an underlying contractual relationship, and the essence
of the covenant is that neither party to the contract will do
anything which would deprive the other of the benefits of the
contract.” Milne Employees Ass'n v. Sun
Carriers, 960 F.2d 1401, 1411 (1991) (emphasis added);
see also Chateau Chamberay Homeowners Ass'n v.
Associated Int'l Ins. Co., 90 Cal.App.4th 335, 345
(2001) (“the implied covenant imposes upon each party
the obligation to do everything that [a] contract presupposes
they will do to accomplish its purpose”). As a result,
Plaintiffs would be required to demonstrate the existence of
a contract to claim a breach of the implied covenant, and
this claim is inextricably intertwined to the claim for a
breach of the agreement. See Mosten Mgmt. Co. v.
Zurich-American Ins. Group, 62 Fed.App'x 175, 178
(9th Cir. 2003) (find a claim for a breach of the implied
contract was “inextricably intertwined” with the
plaintiff's “claim to obtain… contract
benefits”).

Likewise,
Plaintiffs would be required to show the existence of a
contract for the “claim” for specific
performance, which is “not an independent cause[] of
action” but rather “a remedy for a breach of
contract where there is no adequate remedy at law.”
Billingsley v. MV Transp., Inc., 2017 U.S. Dist.
LEXIS 38991 at *16 (E.D. Cal. Mar. 17, 2017) (citing
Wilkinson v. Wiederkehr, 101 Cal.App.4th 822, 833
(2002)). As a remedy, the request for specific performance is
“dependent upon [the] contract claims, ” and thus
inextricably intertwined with the existence of the alleged
purchase and sale agreement. See Id. The same is
true of Plaintiffs' request for a common count. See
Batt v. City and County of San Francisco, 155
Cal.App.4th 65, 82 (2007) (explaining a common count
“is not an independent cause of action but merely a
type of remedy” under California law).

Because
Plaintiffs' claims and remedies are all inextricably
intertwined to the alleged Purchase and Sale Agreement with
Goose Pond Ag, no apportionment of ...

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